Vestel Elektronik Sanayi Ve Ticaret A.S. v Access Advance LLC (formerly HEVC Advance LLC)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Birss,Lady Justice Elisabeth Laing,Lord Justice Nugee |
| Judgment Date | 26 March 2021 |
| Neutral Citation | [2021] EWCA Civ 440 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2020/0019 |
| Date | 26 March 2021 |
[2021] EWCA Civ 440
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, BUSINESS AND PROPERTY COURTS OF
ENGLAND AND WALES, PATENTS COURT
His Honour Judge Hacon sitting as a judge of the High Court
HP-2019-000008
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Nugee
Lady Justice Elisabeth Laing
and
Lord Justice Birss
Case No: A3/2020/0019
Mark Chacksfield QC and Henry Edwards (instructed by EIP Europe LLP) for the Appellants
James Segan QC (instructed by Powell Gilbert LLP) for the First Respondent
Meredith Pickford QC and Andrew Scott (instructed by Bristows LLP) for the Second Respondent
Hearing dates: 2nd, 3rd March 2021
Approved Judgment
This appeal is from the order of HHJ Hacon sitting as a judge of the High Court dated 16 th December 2019. The order set aside service of the claim form out of the jurisdiction and declared that the court had no jurisdiction to hear the claim. The claimants appeal with leave partly from the judge and partly given by Floyd LJ. Owing to various shifts in the way the claimants have put their case, it will be necessary to go through some of the procedural steps in detail.
Background and context
The Vestel group is based in Turkey and makes televisions. The second appellant, Vestel UK, sells these televisions in the UK. The UK is the group's largest market in the EU and one of its largest markets worldwide. Vestel's televisions are sold under various brands including Toshiba, Hitachi, Telefunken and Panasonic. It is convenient to use the term Vestel to apply to the two claimants. Nothing now turns on the difference between the two.
There is a form of high definition television technology called High Efficiency Video Coding (HEVC). This is a video compression system and is defined in a standard called H.265. Vestel's televisions use that technology. The standard is promulgated by the International Telecommunication Union (ITU), a UN agency based in Geneva. A large number of patents have been declared as essential to the standard. I will use the term SEPs (Standards Essential Patents) to refer to them without getting into the distinction between patents only declared by their owner to be essential as opposed to patents which have been found actually to be essential. We have not been taken to the relevant rules of the ITU, but we were told that the relevant rules require that patentees who declared SEPs to this standard must commit to licensing them on terms which are FRAND, i.e. Fair, Reasonable and Non-Discriminatory.
Philips, the second respondent, is a Dutch company, part of the well-known Philips group of technology companies. Philips has declared some patents as essential to the standard.
Access Advance is a company which administers a patent pool for the standard (the HEVC Advanced pool). Patent pools allow different organisations to pool their patents together for the purposes of licensing those patents to third parties. This particular pool includes Philips' SEPs. The HEVC Advance pool is not the only patent pool holding SEPs for the H.265 standard. There is another pool operated by MPEG LA. Although there are currently some SEPs in both pools, there are many SEPs which are only in one pool or the other one. Access Advance operates as a representative for the holder of the relevant patents and offers a licence on that basis. It does not own any patents.
Vestel need a licence from the HEVC Advance pool or from Philips directly. Access Advance offers a licence called the Patent Portfolio Licence Agreement (PPL). Vestel contend that the terms of the PPL are not FRAND. One major reason is that Vestel say the royalty due ($1.33 per unit) is too high. Vestel point out that the MPEG LA royalty is 20 cents per unit. Whether that is an appropriate comparable rate is not an issue we have to decide. One argument is that the MPEG LA rate is not a good comparable because, it is alleged, the patentees in that pool are also implementers and so have an interest in a lower rate.
The PPL is a worldwide licence, i.e. it licenses patents from the whole world, including UK patents. Vestel agree that such licences should be worldwide and contend that that is FRAND.
The action began as a competition law claim by Vestel for abuse of dominance under Article 102 Treaty on the Functioning of the European Union (TFEU) and section 18 of the Competition Act 1998. It was brought against Access Advance and Philips. Philips is said to be joined both in its own right and in a representative capacity representing all the other patent holders in the HEVC Advance pool. The representative capacity issue is not before us.
The Particulars of Claim pleaded Vestel's case on the relevant market; the alleged dominant position of both Philips as a holder of SEPs and of Access Advance as administrator of the patent pool; and the alleged abuses. A number of alleged abuses were relied on. The main ones were the failure to offer a licence on FRAND terms and the demanding of royalty rates which were excessive.
The relief Vestel sought was for the court to grant declarations. Essentially the declarations were that the respondents had abused their dominant position, that the PPL was not FRAND whereas Vestel's counter-offer was, and that if neither set of terms were FRAND then the court should declare what licence terms would be.
The legal context for all this arises from a series of cases, culminating in the judgment of the Supreme Court in Unwired Planet v Huawei [2020] UKSC 37. By that judgment the existence of a jurisdiction to make FRAND declarations has been confirmed. However the present case is in a different form from the previous ones. Cases like Unwired Planet are essentially claims for UK patent infringement brought in this jurisdiction by the patent owners against companies implementing the technology here. The FRAND declaration is granted as part of the remedy for patent infringement on the basis that once the patent holder has vindicated their right, they would normally obtain an injunction. However in the relevant regime the infringing implementer has a right, legally enforceable against the patent holder, to insist on being granted a licence on FRAND terms instead of being injuncted. If, as commonly happens, the parties cannot agree what terms are FRAND, the court uses its declaratory powers to sort that out.
This case is different because it is an implementer (Vestel) which is seeking a FRAND declaration. There is no claim for patent infringement. Nor have Vestel used the machinery available to them under the Patents Act 1977 to bring a claim for a declaration of non-infringement or revocation of any SEPs before the court. Vestel candidly agree they do need a licence, although it is fair to note that they have not admitted any particular patent is valid or infringed/essential.
When the action began Vestel's case was legally coherent in that the claimants were bringing it as a claim in tort against the defendants for abuse of dominance and then seeking the FRAND declarations as part of the remedy. The dominance comes from the patents and the abuse was the failure to offer a licence which was FRAND. However since the defendants were overseas companies, the court's jurisdiction had to be established.
For Philips, as a European company, the legal requirements came from the EU Regulation 1215/2012 (Brussels 1 Recast). Vestel relied on Article 7 (2) (place where the harmful event occurred) as a justification for bringing a claim in this jurisdiction rather than suing Philips in its country of domicile (the Netherlands) under Article 4.
For Access Advance, as a United States corporation, Vestel needed permission to serve out based on one of the gateways in CPR PD 6B para 3.1. The primary grounds relied on were gateway 9 (claims in tort, damage within the jurisdiction) and gateway 11 (claim relates wholly or principally to property within the jurisdiction). Also relevant were gateway 3 (necessary and proper party) and gateway 4A (same facts) but neither of those could succeed without Vestel establishing some jurisdiction by another route first.
The Master gave leave to serve the claim on Access Advance out of the jurisdiction, with Philips having been served without permission under the terms of Brussels 1 Recast. After that Access Advance and Philips applied to set aside service and each sought a declaration that the court had no jurisdiction over them.
The judge ruled in favour of Philips and Access Advance. In relation to Philips, amongst other findings, the judge held (paragraph 67) that none of the evidence Vestel had filed disclosed any credible basis on which to conclude that Vestel UK had suffered or would suffer any direct damage arising from the alleged abuse of dominance, assuming the abuse was proved at trial. He therefore rejected the claim based on Article 7(2) of Brussels 1 Recast.
In relation to Access Advance, the relevant and undisputed legal principles can be derived from Brownlie v Four Seasons Hotels Inc [2017] UKSC 80. The claimant must establish three things: (i) that the case falls within at least one of the jurisdictional gateways in paragraph 3.1 of CPR PD 6B, (ii) that the claimant has a reasonable prospect of success in the claim, and (iii) that England and Wales is the proper place in which to bring the claim. Before the judge, Vestel failed at step (i) on all of the gateways relied on. The judge also held that the abuse of dominance claim failed at step (ii) on the basis that Vestel had failed to show they would suffer any damage. Step (iii) (referred to below as forum non conveniens) did not need...
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